June 21, 2012

Sorry about the prolonged interruption. Work demands-notably testimony in a couple of cases-intervened. One of the cases, believe it or not, stems from the California electricity crisis of the summer of 2000. The wheels of justice do grind slowly. We’ll see how fine. On Tuesday, I testified at a FERC hearing/trial relating to refunds demanded by electricity buyers in California.

The interruptions may recur going forward. I appreciate your patience, and the inquiries of those who wondered about my absence.

A few quick comments on things that caught my eye in the past couple of weeks.

My last post was on the administration’s sole commitment to transparency, i.e., it’s chattiness on sensitive intelligence matters, in an information operation designed to make Obama look like a synthesis of Rambo and Thomas Aquinas. In the weeks following, this issue has caught fire to some degree, at least in DC (though popular opinion has been somewhat muted). There have been numerous calls for official investigations. These are not purely partisan. Diane Feinstein and Carl Levin have also expressed dismay at the leaks. And in the latest episode of the inversion of transparency, Obama has asserted executive privilege in the Fast & Furious matter. His assertion is either facially baseless and contrary to established precedent-or implicates him in a coverup.

Hillary botched the Russian helo to Syria story. By suggesting that Russia was sending new equipment to Syria, Hillary gave the Russians the opportunity to make outraged denials. On the subject generally, here’s a question that I think is important, but which hasn’t been asked. Where is Syria getting the spare parts and support services for its Russian/Soviet weapons? Especially at the increased operational tempo, Syria would need a steady supply of spares to keep its forces in the field. And likely also some repair and support services. Arab armies are notoriously-notoriously-bad at this. (It’s something that has driven American trainers assigned to Arab armies, such as Egypt’s, absolutely crazy over the years.) I wish someone would ask, investigate, etc.

Obama met with Putin in Cabo. Obama came out of the meeting looking like he would have preferred 32 root canals sans anesthesia. He got nothing from Putin. Well nothing substantive, that is. But I am sure that Putin gave him plenty of disdain. Obama later said that China and Russia were not on board regarding Syria. No sh*t. What was his first clue?

It has been reported that Putin will attend the Olympics in London after all. Not the opening ceremonies, as is traditional, but the judo competition. You know, to see the next generation of Russian billionaires.

Putin jetted from Cabo to St. Petersburg, for the Annual Economic Forum. He was in fine form, and in some ways, a flashback to 2008. That is not a compliment. In 2008, Putin famously asserted that Russia was an island of stability in the world economic storm. That was right before the country suffered the biggest decline of any major economy. Putin also lashed out at the west generally and the US in particular for causing the world crisis. He repeated both themes yesterday, in a somewhat schizophrenic performance. First, he stated that Russia is a strong country capable of withstanding another global economic crisis. This despite the fact that Russia is even more dependent on energy/oil now than in 2008, and that the link between economic crisis and oil prices is as strong today as it was four years ago. In other words, Russia is more dependent on oil than ever but Putin believes it is perfectly positioned to withstand another crisis. Or something. And speaking of oil, Brent is trading with an $89 handle, down 4 percent on the day and over 20 percent over the last several weeks, and Urals with an $88 handle (a $1.60 discount to Brent). Recall that Russia’s budget balances at Urals=$117. This may explain the vituperativeness of Putin’s attack on the US and the west. The more nervous he gets about economic conditions, the more he directs his salvos westward. This reflects, IMO, his rage at the fact that Russia is hostage to the west, via the commodities price channel. It is an inevitable consequence of the marriage of comparative advantage and the natural statism of Putinism. And it drives him nuts.

Putin also channeled his inner Barney Frank and said that the west needed more effective regulation of derivatives markets. (Bad mental image, I know.) The man is an expert on everything.

“And speaking of oil, Brent is trading with an $89 handle, down 4 percent on the day and over 20 percent over the last several weeks, and Urals with an $88 handle (a $1.60 discount to Brent). Recall that Russia’s budget balances at Urals=$117.”

We well recall the heady days of Spring 2009, when the price of oil went below $40. Surely the Russian economy would collapse and We would be able to gain control of the Russian energy sector and get Our rebellious servant Vladimir and Our junior associate Mikhail to trade places!

Alas, it was not to be.

Our dear Professor, though We dream of Russia’s financial collapse, We fear We have not yet wrecked the global economy to prevent, first its recovery as energy prices drop, and secondly the revival of energy prices as the global economy recovers.

We remain appreciative of the assistance you and your Chicago School have given Us in Our pursuit of Our First Principle “All for Ourselves and Nothing for Other People.”

The Siloviki -Putin-mafia and their loyal servant Don-Vlasimir – pursuit of their First Principle “All for Ourselves and Nothing for Other People.”

The U.S. blockage of the construction of pipeline routes to Iran from Azerbaijan, Turkmenistan, and Kazakhstan has meant that these former Soviet states remain heavily reliant on export routes through Russia or countries subject to Russian intimidation (i.e., Georgia).

Washington might well respond that it shouldn’t have to make any concessions to Moscow in order to obtain its cooperation on this matter since preventing Iran from acquiring nuclear weapons benefits everyone, including Russia. Moscow, though, doesn’t agree, but instead sees only high costs and low benefits from active Russian cooperation with the U.S. on the Iranian nuclear issue. The only way that the U.S. might obtain such cooperation from Moscow is through concessions of such magnitude that Washington would not – indeed, could not – make.

All this means that any expectation that exists in Washington that Moscow can be persuaded to make a meaningful contribution either to inducing Tehran to cooperate on the nuclear issue or punish it for not doing so is simply misplaced.

Mark N. Katz is a professor of government and politics at George Mason University,

Lots of nerves about oil in Russia this last week. Expect a number of congratulatory media pieces on the size of the reserve and the fact that Russia could issue a ton of debt without a problem. Both good points…not arguing that (Kudrin should get a national holiday named after him here…he won’t of course), but I’d love to see an analysis of just how long Russia could withstand a steep drop in oil prices. Russian bigwigs don’t look at the 2008 downturn as a failure; on the contrary, they hold up the fact that Russia got through it as an example of the stamina and strength of the economy (never talking about how short the downturn was).

“The Siloviki -Putin-mafia and their loyal servant Don-Vlasimir – pursuit of their First Principle “All for Ourselves and Nothing for Other People.”

Oh, dear Anders, if only that were true! If only that were true!

Alas, dear Anders, it is not. Our rebellious servant Vladimir has wasted so much of the wealth that rightfully belongs to Us on trivial irrelevancies like wages and healthcare for common people in Russia that even the Financial Times Alphaville blog, usually so rightfully scornful of Our rebellious servant Vladimir and all his nefarious works, has noticed than, far from being on a trend towards a population of ~125 million by 2025, Russia is on a trend towards a population of ~147 million by 2025!

Imagine the force with which this post struck Us! Since the mid 1990s, We have dreamed of a Russian population of ~130 million by 2005, shorn of military capability, and with the Russian energy sector in Our hands. Now We must face the prospect of a thriving Russian population, well armed, whose prosperity and armament is bought with money that rightfully belongs to Us! Our second principle is “In a depression, assets return to their rightful owner.” Here we have gone to the trouble to engineer a global depression, with much assistance from the Chicago School, only to find that the Russian energy sector remains out of our hands! Unconscionable!! Intolerable!!!

Like I said…congratulatory stuff to counter the main economic discussion. But “a” uses population statistics instead of the recent bounce oil prices took? Man…that’s thin gruel with which to mock your detractors. What “a” and his ilk a loathe to mention is that it’s not a baby boom that’s the driver of the Russian population uptick, it’s immigration. Natural increase is still negative; it’s not as bad as it used to be true…but it’s still negative. But not to fear Putin apologists! I’m sure that nothing will ever stem the flood of Central Asian migrants who are made to feel so welcome here.